South Africa's Naspers rules out $114 billion Tencent stake spin-off

JOHANNESBURG (Reuters) - South Africa’s Naspers (NPNJn.J) does not plan to spin off its $114 billion stake in Tencent, its boss said on Monday, a push back against investors urging a break-up to close a widening discount between its market value and that of its one-third stake in the Chinese internet company.

Founded in 1915, Naspers has transformed itself from an apartheid-era newspaper publisher into an $85 billion multinational with private equity-style investments in e-commerce platforms such as auction sites, online retail and e-classifieds.

But it owes much of that valuation to its 33 percent Tencent (0700.HK) stake, which is worth about $114 billion, or 20 percent more than Naspers itself. The discount has prompted some investors to urge Chief Executive Bob van Dijk to find ways to narrow it.

“From the moment Tencent was listed on Hong Kong stock exchange, some had been asking us to do that. You can imagine how unhappy shareholders would be if I had done that 10 years ago,” van Dijk told Reuters in a telephone interview.

The value of Naspers’ stake surged from around $231 million to around $114 billion in 2004 when Tencent floated on the Hong Kong stock exchange.

Tencent, which runs China’s biggest gaming and social media firm, shot past forecasts to post its highest quarterly profit in over two years last month, helped by strong growth in gaming and payments.

Tencent is among the firms best placed to benefit from the roll out of faster 4G mobile network in China because it uses its instant messaging platform WeChat - a social media fabric in China - to sell other services such a music and video streaming.

Van Dijk said the discount would narrow as and when the company’s e-commerce businesses, whose losses have been rising every year since 2012, contribute to the bottom line.

“We’re working very hard to build our e-commerce businesses and I’m confident that the discount will narrow over time as those businesses get closer and closer to profitability,” he said, without giving further details.

Naspers has splurged around $4 billion since 2012 to drive growth mainly in commerce platforms that include mobile classifieds apps Letgo and OLX - the biggest classified sites in India and Brazil - but it has little to show for its investments so far.

It once again rode the breakneck rise of Tencent to lift its annual earnings by more than 40 percent on Friday while the e-commerce unit widened losses to $682 million.

Some investors insist pinning hopes on the e-commerce business is not the best solution to close the discount and that van Dijk should still consider hiving off the Tencent holding.

“The most effective measure is to spin-off the Tencent stake to Naspers’ shareholders,” AIM&R Managing Director Albert Saporta said in open letter dated June 15 and addressed to van Dijk.

“You will not be the CEO of South Africa’s largest company by market capitalization anymore, but you will greatly enhance shareholder value.”